European gold ETFs/ETCs dominate global inflows

News Arnulf Hinkel, financial journalist – 19.02.2021

© PantherMedia /Circumnavi
© PantherMedia /Circumnavi

For the first time since October 2020, global gold holdings managed in gold-backed ETFs and ETCs grew again, after two months of net outflows. In January, however, according to the latest data from the World Gold Council, global outflows of 20.1 tonnes were offset by significantly stronger inflows of 34.0 tonnes of gold. Total gold holdings for physically backed gold funds and ETCs amounted to 3,765 tonnes at the end of January. The previous record level of 3,915.8 tonnes was thus narrowly missed, by only 4 per cent.

Europe overcompensates for development in other regions

Gold-backed ETFs and ETCs increased by 17.5 tonnes in January, offsetting outflows in other regions, above all the US, where they predominated at 6.3 tonnes. Furthermore, Asian gold ETFs minimally contributed to the growth with an increase of 0.3 per cent, which was by no means characteristic of the overall development for the region. Gold holdings managed in Asian ETFs have grown by more than 50 per cent over the last 12 months.

Three factors likely to support gold demand in 2021

As the World Gold Council pointed out in its Gold Outlook 2021, various factors could weigh on investor portfolios and are thus likely to support continued demand for gold ETFs and ETCs. Primarily, these are the very high levels of government debt throughout the world, which are due to the impact of Covid-19 on most sectors of the economy, in addition to growing inflationary pressures and potential stock market corrections, as valuations are currently very high. In the Council’s view, the trend is also apparent in increased demand for gold-backed ETFs and ETCs in January despite the fact that the gold price has mainly been moving sideways for the past weeks. In January, when the price for one gram of gold moved within a margin of €48.63 to 50.98, Xetra-Gold holdings grew slightly, by 1.3 tonnes.

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